Question: Waterway company commonly issues long term notes payable to its various lenders. Waterway has had a pretty good credit rating such that its effective borrowing

Waterway company commonly issues long term notes payable to its various lenders. Waterway has had a pretty good credit rating such that its effective borrowing rate is quite low ( less than 8% on an annual basis). Waterway has elected to use the fair value option for the long term noted issued Barclays bank and has the following data related to the carrying and fair value for those notes. Any changes in fair value are due to changes in market rates, not credit risk.

Carrying value Fair value

December 31, 2025 $55,500 $55,500

December 31, 2026 $47,000 $45,600

December 31, 2027 $34,600 $36,400

Prepare the journal entry at December 31( Waterways year- end) for 2025, 2026, and 2027, to record the fair value option for these notes.

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